Trademark Valuation & Licensing Advisory

The three internationally recognised approaches are the cost approach, market approach, and income approach — of which the relief-from-royalty method (a variant of the income approach) is most widely accepted for trademarks. For M&A transactions in India, Rule 11UA of the Income Tax Rules 1962 governs the valuation of unquoted shares and intangibles for tax purposes, and a merchant banker's report is required where the transaction involves shares. Under IND AS 38 (Intangible Assets), the valuation must reflect the present value of expected royalty savings attributable to owning the mark. We typically prepare a detailed royalty rate benchmarking analysis using comparable licensing databases before arriving at the fair value.

Yes. Licensing of a trademark — whether registered or unregistered — to any entity, including a group company, is a taxable supply under Section 7 of the CGST Act 2017, classified as a supply of services. The applicable GST rate is 18% under SAC 9973 (Licensing Services for the Right to Use Intellectual Property). Where the licensor and licensee are related parties and the transaction is without consideration or below open market value, the value must be determined under Rule 28 of the CGST Rules 2017 (open market value). Proper invoicing with HSN/SAC disclosure is mandatory under Rule 46 of the CGST Rules 2017.

An overseas assignment of a trademark by an Indian resident to a non-resident constitutes a capital account transaction under Section 6 of FEMA 1999. The assignment proceeds must be received in India through normal banking channels and are governed by FEMA Notification No. 20(R) — Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations 2017 and the related Master Direction on Reporting. If the assignment is to a foreign subsidiary, transfer pricing documentation under Section 92C of the Income Tax Act 1961 (arm's length price determination) is also required. Form 15CA/15CB under Section 195 of the Income Tax Act 1961 must be filed before remittance if any tax is withheld on the consideration.

Royalty paid to a non-resident trademark owner is subject to TDS under Section 195 of the Income Tax Act 1961 at the rates specified in the relevant Double Taxation Avoidance Agreement (DTAA), or at 10% plus surcharge and cess under Section 115A if the DTAA rate is higher or no DTAA applies. The payer must obtain the foreign licensor's Tax Residency Certificate and Form 10F to avail DTAA benefits per Section 90(4) of the Income Tax Act 1961. Rule 37BB of the Income Tax Rules 1962 requires filing Form 15CA (and Form 15CB from a CA) before remitting any royalty exceeding ₹5 lakh. 'Royalty' for this purpose includes amounts for use of a trademark as defined in Explanation 2 to Section 9(1)(vi) of the Income Tax Act 1961.

Yes. An Indian company may receive royalty from a foreign subsidiary for use of its trademark; such income is taxable as business income or income from other sources under the Income Tax Act 1961 in India. Transfer pricing rules under Chapter X (Sections 92–92F) of the Income Tax Act 1961 require that the royalty rate be at arm's length, documented in a transfer pricing study prepared before the due date of filing of the return. If the royalty agreement is for more than three years or involves recurring annual payments exceeding USD 1 million, the agreement should be approved by the company's board and reported in the Annual Performance Report filed with the RBI under FEMA. The income received must be brought into India within the time stipulated under FEMA (Export of Services) Directions or within 9 months for service exports.